The Nasdaq sold off sharply
last week as the negative sentiment from higher than expected US inflation data
was compounded by growing concerns about the economic outlook.
Credit spreads continue to
widen, credit default swap spreads for AI-linked hyperscalers and data center
operators have surged to record highs, and the Federal Reserve is forced to
keep a hawkish bias amid higher inflation.
Moreover, oil prices continue
to surge amid stalled US-Iran negotiations and the ongoing Saudi-Houthi
conflict. To sum up, the bearish pressures continue to mount as the stock
market seems to be hanging by a thread.
This week, the
most important event will likely be the release of the US Flash PMIs on Friday,
barring a surprising breakthrough in US-Iran negotiations of course.
If the data
disappoints, growth concerns will likely increase, and we could see another
selloff in the Nasdaq. Better than expected data, on the other hand, might lead
to a relief rally in the short-term but it wouldn’t change the bigger picture
as it would just reinforce the need for rate hikes.
NASDAQ TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On
the daily chart, we can see the Nasdaq (US100 CFD contract) broke below the major trendline and extended the drop
into new lows as more sellers piled in to target the 28,742 level. If the price
gets there, we can expect the buyers to step in, with a defined risk below the level,
to position for a rally into new record highs. The sellers, on the other hand,
will look for a break lower to increase the bearish bets into the 26,971 level
next.
NASDAQ TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On
the 4 hour chart, if we get a
pullback to retest the broken trendline again, we can expect the sellers to
step in around the 30,000 resistance zone, with a defined risk above it, to
keep pushing into new lows. The buyers, on the other hand, will want to see the
price breaking higher to start positioning for a rally into new all-time highs.
NASDAQ TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we
have a minor downward trendline defining the bearish momentum on this timeframe.
The sellers will likely continue to lean on the trendline, with a defined risk
above it, to keep targeting new lows. The buyers, on the other hand, will look
for a break higher to position for a pullback into the 30,000 resistance. The
red lines define average daily range for today.
UPCOMING CATALYSTS
On
Thursday we get the latest US Jobless Claims figures, while on Friday we
conclude the week with the US Flash PMIs.
This article was written by Giuseppe Dellamotta at investinglive.com.